It means the ripper has made a uncorrectable mistake while encoding, and that the rip will be lower quality than it should be given the source because of this mistake. It's used to describe messed up group rips and grounds for a proper by another group actually, but people normally use it to describe a flawed rip.
Main reasons are:
*BAD IVTC* - They've forgotten, or careless didn't bother to convert an artificially high framerate to the correct fps. This is only applicable to NTSC dvds/material that reports 29.9fps on the DVD, but the content is actually 23fps and the DVD uses a methods to artificially up the framerate to NTSC tv framerate. The problem with not doing this is that quality is significantly reduced, as instead of encoding the correct number of frames, to make up the framerate, the same frames are duplicated which means a) instead of encoding 23fps, it wasted video data in encoding nearly 30fps b) it can and normally does give a stuttering playback because you effectively see the exact same frame several times a second.
*BAD CROPPING* - You should *always* crop of black boarders for several reasons. The first is because it reduces the quality significantly, since you have to encode a larger res that you should. Secondly, encoding solid colours takes a lot of video bitrate so don't forget to crop people!!! Ideally there should be no boarders, but a couple of pixels is acceptable..
*BAD DEINTERLACING* - They've forgotten to remove interlacing which makes playback almost unwatchable on a PC
*BAD AR* - The aspect ratio is totally foobar, ie. squashed heads, or fat people
*BAD RES* - The res is way too small (under 512 normally), which means when you resize it, the thing looks crap. Don't go below 512!
*BAD BITRATE* - The bitrate is just far too low to get decent results. You should never go under 800kb/s unless you get a high bits/pixel
Using a correct ripping method (ie. gknot following the doom9 guides) will make any of these an impossibility.
For these reasons in addition to all the info in the Sticky topics of the release section a rip will be moved to lesser quality. The thing about the dual format of higher/lower sections is that its done regarding quality, not nescessarily source. Poor authored dvds maybe moved to lesser quality too. If you have heavy ghosting or something in a rip, then it should also go in lesser quality.